Neville Richardson : A merger of mutuals in interesting times

Neville Richardson thinks putting Britannia together with Co-op Financial Services can create a real force. David Prosser reports

Neville Richardson is a man who believes his time has come. As chief executive of Co-operative Financial Services, he runs the financial arm of the world's largest consumer co-operative. It's a mutually owned organisation, like the Britannia Building Society – which he ran last year until its merger with Co-operative Insurance Services (CIS) brought it into the Co-op group.

Suddenly, everyone is talking about mutuals and co-ops. David Cameron wants more of them running local schools and hospitals. Retailer John Lewis, owned by its employees, has got its own TV doc-umentary. And the credit crisis has been devastating for the reputation and brand value of the banks that have always dominated financial services in this country. Richardson is cautiously delighted. "Mutuality is not a panacea: as with plcs, you have well run and badly run organ-isations," he says. "The key, though, is what the organisation is all about. Since you don't have shareholders, every time a customer walks through the door, you're dealing with an owner of the business."

It is certainly the case that having mutual status during the credit crisis was not the financial equivalent of a cloak of invisibility. Though many have noted that the banks which blew up most dramatically – Northern Rock, Bradford & Bingley and HBOS – were all former building societies that had demutualised in the mid-Nineties, there have been casualties in the mutual sector too, with several players having to be rescued by larger rivals.

Overall, however, Richardson believes he and his colleagues have had a good war. "The thing that people used to point out as the advantage of being a bank rather than a mutual was access to capital and liquidity," he says. "Well, that forced us to hold more of both, and you saw how the supposed advantage of the banking sector worked out during the crisis."

The building society sector has also benefited, Richardson thinks, from the shake-out prompted by the departure of so many big names in the Nineties – and the targeting of many more by carpetbaggers eager to make a quick buck from a demut-ualisation. "In the long run, the carpetbaggers did us a favour," he says. "They forced us to focus on efficiency and proving our merit. We've had to prove that we can be at least as strong as a plc." The best mutuals were thus in a position to capitalise on the post-crisis environment for financial services.

"In our research, the phrase that keeps coming out is 'anger'," Richardson adds. "The inertia in people's mindset before the crisis has been shattered by what happened: last year, we saw a 38 per cent increase in the number of new current accounts opened with us."

It was the desire to make the most of this sort of opportunity that drove the merger of Britannia and CIS last year, a deal that was done remarkably quickly. In January 2009, new legislation tidying up the laws on mutuality – without which the merger of a building society and a co-operative would not have been legally possible – was winding its way through Parliament. A few days before it received Royal Assent, Richardson ran into David Anderson, the boss of CIS, at a business meeting in the North West. They quickly agreed that a combination of their organisations might be a compelling proposition.

The Co-op's financial services businesses offered insurance products, current account banking and a credit card. Britannia was strong on savings and mortgages. Rolling the two together would create a full-scale financial services business capable of taking on the big banks, the two men concluded.

Nevertheless, Richardson, who spent more than 20 years in accountancy before joining Britannia in 1998, had some concerns. In his days at what was then Price Waterhouse, he had worked on plenty of takeovers and mergers, some much more successful than others. "The key to making this deal work, like any other, is working out whether you have similar cultures and shared values," he says. "The mergers that fail are those that get hung on up on the emotive issues."

For this reason, the business has chosen to maintain both the Co-operative and Britannia brands for a couple of years, and to preserve their presences in their respective Manchester and Leek headquarters. There has been remarkably little use of terms such as "synergy" – the sort of jargon generally bandied around when businesses come together.

Thanks to Britannia, Richardson points out, the business has a nationwide branch network that will eventually be able to offer the products Co-operative brought to the table, notably current accounts. In the longer term, the potential of the Co-operative Group's network of supermarkets is also highly attractive. The group's third main arm, Co-op Travel, is clearly ripe for exploitation too.

Richardson says the key to making the merger really fire on all cylinders will be taking staff with him. Having seen members of both organisations sign off on the deal last summer, Richardson embarked on 13 roadshows around the country, making presentations to 24,000 staff.

It was the sort of communication exercise that is an important part of running a mutual business, he says. "One of our values is that this has to be a great place to work, grow and develop" and communication and is vital, he says.

It's the sort of sentiment one might expect to hear from any business, of course, but Britannia has regularly been voted one of the best employers in the UK to work for. Senior managers' pay is partly determined by a scorecard of performance indicators based on the financials, but also based on feedback from customers and employees. Richardson is acutely aware of the financial services industry's reputation on pay. "Look, we have to set pay partly on the basis of the market, but the overall picture of working for an organisation is a combination of things, and if your only tool is pay then people are going to end up going elsewhere."

The Co-operative Group's focus on social responsibility will foster the perception of staff being on the right side of the argument, he says. "This is a bank that has turned away £1bn-worth of business because it didn't meet our ethical standards," he says, pointing out that as a shareholder the group voted against the deal which saw Royal Bank of Scotland acquire ABN Amro, and against the remuneration packages handed to Northern Rock executives before that bank went bust.

CV: Neville Richardson

Richardson, 52, is the chief executive of Co-operative Financial Services (CFS). He is married with four children


*Has run CFS since last summer, when the business was formed following a merger between Co-operative Insurance Services and the Britannia Building Society.

*Richardson previously ran Britannia, having first joined the society in 1998 as finance director following a 21-year career in accountancy.

*Serves as a director of Mutuo, an industry-wide company set up to promote the benefits of mutuality, as well as being a member of the court of the University of Lancashire.


*A keen runner of half marathons, Richardson supports Manchester City, Sale Sharks and Lancashire County Cricket Club.

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